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Malcy’s Blog – Bahamas Petroleum

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Oil price, BPC, Wentworth Resources. And finally…

WTI $45.71 +80c (Weds close), Brent $47.80 -80c, Diff n/a, NG $2.93 -2c, 

Oil price

No trading in WTI yesterday but with US markets trading in thin volume and mainly only until lunchtime today for Black Friday guidance is poor but as I write WTI is indicating $45.34 and Brent $48.15. With further Norwegian strikes planned by security guards at a gas processing plant and two gas fields we might see this escalating next week.

All eyes are obviously on Opec+ for Monday and Tuesday of next week, if I wanted to be bearish I would say that the market has priced in that the cartel will push back the 2m b/d of production increases for a 2/3 month period.  As it is I happen to remain fairly bullish for the longer term for reasons already discussed, but in an interview this morning on CNBC Lord Jim O’Neill agreed with me that the next two quarters could be very strong for international GDP growth.

If this was to be an accurate prediction it would validate my thoughts of potential demand drive early next year and with it a consolidation of the oil price at a higher level than currently on the strip.

 

Bahamas Petroleum (LON:BPC)

BPC has provided an update on cost estimates and funding arrangements for well operations in The Bahamas which have been affected by the COVOD-19 virus. The company state that the impact means that BPC and Stena Drilling have decided to ‘implement enhanced Covid-19 mitigation measures; this includes heightened isolation and testing measures for all crew and personnel, extended mandatory quarantine in secure hotel facilities, and private charter flights’.

It also means that the cost estimate for Perseverance #1 is revised upward by approximately 15%, to between $24 million to $28 million (from $21 million to $25 million) with the contingency element expanded to $7 million (from $5 million).

In order to finance this and to ‘provide appropriate financial headroom, the Conditional Convertible Note facility  has been increased by £4.75 million to £15 million in total, with an initial subscription notice issued for £3 million  (with funds anticipated before year end) and the balance of the facility to be provided in a timeframe consistent with the demands of operations (subject to satisfaction of certain conditions precedent)’.

Commenting, Simon Potter, CEO of BPC, said:

“Given the ever-evolving and escalating Covid-19 situation around the world, the sobering reality is that preventing the Covid-19 virus spreading onto the Perseverance #1 drilling installation in the first place is dramatically more cost effective than having to deal with it once it has arrived offshore. Hence the considerable efforts put in by BPC, Stena and participating contractors and service companies to develop even more stringent measures to detect and diminish the risk of infection, which are now being implemented, but which will come at a cost.

Fortunately, given the flexible range of funding options the Company has developed over the course of the last two years, we have successfully agreed an increase to the size of our Conditional Convertible Note facility by £4.75 million to offset this increased cost. Moreover, we are pleased that the providers of this facility have demonstrated their commitment to the project by agreeing to provide a portion of this facility unconditionally once the well is spud, and the balance expected to be available as required. In aggregate, these arrangements provide enhanced financial capacity, notwithstanding a worsening Covid-19 environment.

We are aiming to assess what hydrocarbon resource potential lies within the territorial waters of The Bahamas, for the mutual benefit of the nation and people of The Bahamas, the shareholders of BPC, and all other stakeholders. Safe, responsible, and uninterrupted operation is our key objective in the ever changing global Covid-19 environment, and these additional costs and increased funding arrangements reflect a prudent approach to achieving this objective.”

The run-up to drilling the Perseverance#1 well has taken a long time and never been easy, patient shareholders would have been astonished if it had been given a clear run to spud date in December but at least now with the astute financing put in place by the company it is not insurmountable. Other bumps in the road may have to be taken but with everything now in place BPC deserves to take its chance at Perseverance…

 

Wentworth Resources

This morning I was fortunate to interview Wentworth CEO Katherine Roe on my Core Finance show, it was a fascinating insight into a great company 

 

And finally…

It’s a very busy weekend for sport with action around the globe which starts with England’s T20 cricketers taking on South Africa at Newlands, Cape Town at 1600 hrs this afternoon.

Tomorrow has a full rugby set, Wales host England in the Autumn Nations Cup whilst Scotland have already been awarded the game against absent Fiji by 28-0, France take on Italy in the final game. A third successive defeat for the All Blacks is unheard of but they play the Pumas in Australia tomorrow morning with that potential record on the line…

Footy-wise last night it was the Boropa Cup, wins for Spurs and the Gooners, draws for the Foxes 3-3 at Sporting Braga and Rangers held Benfica 2-2 as well. More bad news for Celtic who lost 4-1 in Prague, surely a management change is imminent there…

This weekend sees the Eagles hosting the Magpies tonight with tomorrow’s fixtures including the Seagulls hosting Liverpool, the Noisy Neighbours entertain Burnley, Leeds go to the Toffees and the Blades are at the Baggies. On Sunday, the Saints host the Red Devils, Wolves go to the Gooners and the big weekend fixture sees top of the table Spurs go to 3rd place Chelski at Stamford Bridge.

It is the Bahrain GP this weekend with the race and qualifying in the dark which is always exciting, who will catch Lewis Hamilton, FI Champion again?

Good horseracing as well with cards at Doncaster, Newbury and also at Newcastle for the Fighting Fifth.

So, farewell to the hand of God, as someone once said, oh what a circus….could have been written for him.

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